Jan. 7 (Bloomberg) -- Amazon.com Inc., the world’s largest
online retailer, surged to a record after Morgan Stanley said
the company’s network of distribution centers will help it win
share in an expanding global e-commerce market.

The stock advanced 3.6 percent to $268.46 today in New
York, the highest price since the shares began trading in 1997.
Morgan Stanley upgraded Amazon to overweight from equal-weight
and maintained its $325 price estimate.

Amazon is investing across the company to boost the volume
of products sold on its site, adding features to its Kindle line
of e-readers and tablets and beefing up its inventory and
shipping network. The efforts may help Amazon gain share in a
worldwide e-commerce market that Scott Devitt, an analyst a
Morgan Stanley, estimated will reach $1 trillion by 2016, up
from $512 billion last year, By then, Amazon’s share will be
23.5 percent, pushing net sales to $166 billion, he predicted.

“Amazon.com’s fulfillment network is an under appreciated,
strategic asset.” Devitt wrote in the Jan. 6 report. He had
previously projected 2016 sales of $145 billion and a 20.6
percent market share. “Companies, such as Amazon.com, that have
the ability to decrease variable unit costs in exchange for
fixed-costs will have the opportunity to expand margins and take
share.”

In the third quarter alone, Amazon announced 19 new
fulfillment centers, and reported a 35 percent increase in costs
associated with the network of warehouses, compared with the
same period a year earlier.

“Fulfillment Capacity”

Outside sellers, which accounted for 41 percent of units
sold on the site in the quarter, are helping to drive warehouse
expansion. The third party vendors pay to ship merchandise from
Amazon’s warehouses, leaving Amazon with 100 percent profit on
its commission from the sales.

“We feel very good about the investments we’re making in
fulfillment capacity,” Chief Financial Officer Tom Szkutak said
on a conference call Oct. 25. “We have a lot of experience
starting up new facilities, operating those efficiently and to
the point where, as you know we’ve extended that not only to
offer that service for our retail business, we also offer that
to sellers to fulfill by Amazon.”

Roadblocks in emerging markets such as Russia and Brazil
have slowed the company’s international expansion, Devitt said.
Consumers in Brazil often pay for online purchases through
installments, while those in Russia wait until items are
delivered to pay with cash, he said. That’s a stark contrast to
the payments U.S. users make with one click of a mouse using
credit cards on file with Amazon.

Still, no other company in the world operates in every
region Amazon does, Devitt said.

“Amazon.com appears to be redefining the fulfillment
learning curve as it grows, and this may likely lead to
sustainable barriers to any other global entrant,” he said in
the note.